# [1972] 3 S.C.R. 690

- **Citation:** [1972] 3 S.C.R. 690
- **Court:** Supreme Court of India
- **Decided:** 1972-03-09
- **Bench:** K. S. Hegde, K. K. Mathew
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1972-3-s-c-r-690-5606
- **Pages:** 21

## Headnote

Specific Relief Act (1 of 1877) repealed
by Specific Relief Act (47
of 1963)-.A.pplication jor rescission of convact
and decree in 1967
.wuier s. 35 of 1877 Act-When dight to rescission can be said to have
uccrued under s. 6 of General Clauses Act, 1897.
Specific Relief Act (4~ of 1963) s. 28-Scope of.
Power of Court tip order rescission under the law relating· to specific
relief-No time fixed in decree for specific performance -Effect of-
··Order of ,-escis~ion by Court-Nature of.
Decree for specific performance-If could be executed. by defendant
as mone,v decree.
The appellant was the owner
of
100%
shares in Company 'A'
·By an agreement iiated October 30, 1956, between the appellant and
the respondent, the respondent purchased 49% of the shares with an
option to purchase
the balance
of
51 %
shares. The
respon-
. dent exercised his option but as the shares welre not transferred to him
he filed a suit. The suit was decreed and the decree for specific performance provided that the 51 % shares should be delivered to the respondent
against payJrent by him ~o the appellant of their value; and an injunction was '!llso granted restraining the appellant from voting except in acicordance with the instructions of the respondent.
Except as regards the
injunction, the trail court, however, stayed execution of the . decree and
the stay was continued by the appellate court till the appeal was dismis·
sed in 1965.
The appellant filed an appfioation in 1965 praying that the respon-
·dent may be directed to pay the consideration amount. within such time as
the Court may direct, but the application was, dismissed.
Meanwhile, there were certain orders of atta<;bment of the decree,
who3e effeclt was that the respondent was prohibited and restrained from
alienating, transferring or charging his right, title and interest in the decree
or from obtaining satisfactio~ thereof. Further, in February 1965, a
·~pany 'B' .which had Obtained a decree against a holding company
of the appellant, '3pplied for execution and got the 51 % shares of the
. appellant attached. The executing court ordered that those shares should
oo produced for delivery to the respondent against payment of the ~nsi
·deration mentioned in the specific perfonnance dectete.
The 'A' Company also instituted a ,.suit against the '3ppellant in respect
.of payment made by 'A' -to the Income-tax authorities on behalf of the
;appellant and prayed for possession and sale of the 51% shares in the
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HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathtw, J.)
691
exercise of their lien on those shares.
A rec.eiwr woas appointed in res·
pect of those shares oand the Court directed that the Receiver wOuld be
at liberty deliver the 51% shares to the respondent on payment of the
consideration. This orO::r was communicated by the appellant to the
respondent on January, 11, 1967, and even before that date the appel~
lant wrote two letters.··to the respondent ':lsking him to be ready with the
amount to be paid by him and to take delivery of the shares. Those
letters were refused by the respondent and in·rcply to the letter 'dated,
January 11, 1967, the respondent raised the o~'j,ection that the appellant
was not in a position to give de.livery of the shares and t~t the order
of tm Court ~as not binding on him because he was not a party to the
suit in which, tha~ order was pa~Sted. By a letter dated February 11,
1967, addressed tO the respondent, the appellant sbted that the respondent had forfeired his right to purc:hase the 51 % shares umier the specific
perfonnance decree as he had failed to fulfil his obligation in pursuance
of the notice of the appellant dated January 11, 1967. Thereafter, in
M&eh 1967, the appellant filed an application for rescission of the agreement of sale of 1956 as also the decree for specific performance of the
agreement.
-
The trial court held that the respondent was not keen on paying the
purchase money and get the transfer of 51 % shares for the reason that
th

## Text

_Characters 0–39,722 of 59,122. This is a partial read: ask again with offset=39722 for what follows._

690
HUNGERFORD
INVESTMENT
TRUST
LIMITED (IN
VOLUNTARY LIQUIDATION)
'V.
HARIDAS MUNDHRA & OTHERS
March 9, 1972
[K. S. HEGDE AND K. K. MATHEW, JJ.]
Specific Relief Act (1 of 1877) repealed
by Specific Relief Act (47
of 1963)-.A.pplication jor rescission of convact
and decree in 1967
.wuier s. 35 of 1877 Act-When dight to rescission can be said to have
uccrued under s. 6 of General Clauses Act, 1897.
Specific Relief Act (4~ of 1963) s. 28-Scope of.
Power of Court tip order rescission under the law relating· to specific
relief-No time fixed in decree for specific performance -Effect of-
··Order of ,-escis~ion by Court-Nature of.
Decree for specific performance-If could be executed. by defendant
as mone,v decree.
The appellant was the owner
of
100%
shares in Company 'A'
·By an agreement iiated October 30, 1956, between the appellant and
the respondent, the respondent purchased 49% of the shares with an
option to purchase
the balance
of
51 %
shares. The
respon-
. dent exercised his option but as the shares welre not transferred to him
he filed a suit. The suit was decreed and the decree for specific performance provided that the 51 % shares should be delivered to the respondent
against payJrent by him ~o the appellant of their value; and an injunction was '!llso granted restraining the appellant from voting except in acicordance with the instructions of the respondent.
Except as regards the
injunction, the trail court, however, stayed execution of the . decree and
the stay was continued by the appellate court till the appeal was dismis·
sed in 1965.
The appellant filed an appfioation in 1965 praying that the respon-
·dent may be directed to pay the consideration amount. within such time as
the Court may direct, but the application was, dismissed.
Meanwhile, there were certain orders of atta<;bment of the decree,
who3e effeclt was that the respondent was prohibited and restrained from
alienating, transferring or charging his right, title and interest in the decree
or from obtaining satisfactio~ thereof. Further, in February 1965, a
·~pany 'B' .which had Obtained a decree against a holding company
of the appellant, '3pplied for execution and got the 51 % shares of the
. appellant attached. The executing court ordered that those shares should
oo produced for delivery to the respondent against payment of the ~nsi
·deration mentioned in the specific perfonnance dectete.
The 'A' Company also instituted a ,.suit against the '3ppellant in respect
.of payment made by 'A' -to the Income-tax authorities on behalf of the
;appellant and prayed for possession and sale of the 51% shares in the
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HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathtw, J.)
691
exercise of their lien on those shares.
A rec.eiwr woas appointed in res·
pect of those shares oand the Court directed that the Receiver wOuld be
at liberty deliver the 51% shares to the respondent on payment of the
consideration. This orO::r was communicated by the appellant to the
respondent on January, 11, 1967, and even before that date the appel~
lant wrote two letters.··to the respondent ':lsking him to be ready with the
amount to be paid by him and to take delivery of the shares. Those
letters were refused by the respondent and in·rcply to the letter 'dated,
January 11, 1967, the respondent raised the o~'j,ection that the appellant
was not in a position to give de.livery of the shares and t~t the order
of tm Court ~as not binding on him because he was not a party to the
suit in which, tha~ order was pa~Sted. By a letter dated February 11,
1967, addressed tO the respondent, the appellant sbted that the respondent had forfeired his right to purc:hase the 51 % shares umier the specific
perfonnance decree as he had failed to fulfil his obligation in pursuance
of the notice of the appellant dated January 11, 1967. Thereafter, in
M&eh 1967, the appellant filed an application for rescission of the agreement of sale of 1956 as also the decree for specific performance of the
agreement.
-
The trial court held that the respondent was not keen on paying the
purchase money and get the transfer of 51 % shares for the reason that
the injunction granted by the Court restraining the appelhnt from voting
except under the instructions of the respondent made the r~pondent virtually the owner of tic 100% shares in 'A' company, with full control,
that therefolre, the respondent had committed breach of the contract which
be was directed spedfically to perform, that he creared a situation which
bad made it impossible f<* him to perform hi'S part of the obligation,
and hence the decree for specific ~rformance must_ be rescinded. The
trail court appointed the Receivet in the suit by the 'A' company against
the appellant as Receiver of tic 51% shar~ and directed the respondent
to pay the consideration money to the Receiver within a fortnight from
the date of the order and directed the R~iver to hand over the shares
to the respondent; and that, in default of such payment within the time
specified the. contract and the decree would stand rescinO::d, and that the
appellant would be absolved from all obligation·s thereunder.
The appellate court however held that the application filed
by
the
appellant for the rescission of the contract and dec~:ee was not maintainGble under the Specific Relief Act of 1877 dr of 1963.
'
Allowing the ap~al to
this Court,
HELD : ( 1) ·The Specific Relief Act, 1877 was repealed .bY the
Specific Relief Act of 1963 and the appellant had no accrued ngbt on
the .date of the repeal to file the application under s. 35 of the 1877Act read with s. 6 of the General Clauses Act, 1897. [7000-HI
The
right
to rescind the decree under s. 35 can arise only if the
purchaser makes default in paying the purchase money ordered to be paid
under the decree. Buf before the lapse of reasonable time from the date
of the decree the appellanJ could have no right to . have the decree rescinded on the ground of default. Such a default had not occurred when
the Specifi~ Relief Act, 1877, was repealed as a reasonable time for the
performance of the obligation undei' the decree had not elapsed from the
date of the decree. Tb,ere was no default till 1965 in the present . cue.
all the execution of the decree was stayed by orders of the trial court and ·
the appellate court. [7001).0].
692
SUPREME COURT REPORTS
(1972) 3 S.C.R..
2
Since. s. 28 of the SP'~cific Relief Act, 196~. provides only for
·
( ) Jication fc:ir rescission of a decree f~r specific per~onnance for
A
!:le ".l~f lease of immovable property no apphcauon to rescmd ~ decree
for specific performance of an agreement to sell movables would lie under
that sec1ion. f70l·A·Bl
·
(3) But the Specific Relief A~, 196~, is not an ex~austive enactment,
and under the Jaw rebting to spec1fic rehef a Court wh11:lh Pll3o.~s a deere-:
for specific performance retains control ever the dccrre even after the a
decree had been passed. Ther.efoc:, th! Court, in th~ present case, re·
tained control over the matter desp1te the decree and 1.t was open to the
Court, wheiT it was alleged that. the party ~oved ag:u':lst .had positively
refused to complc~ the contract, to entertam the npphcat10n and order
rescission of the decree if the allegation was p'roved. f701B-C; 703~-cj
Ramdas Khatau & Co. v. Atlas Mills Co. Ltd., A.l.R. 1931 Bombay
lSI; Rahmath Unnissa Begum v. Shimoga Co-operative Bank Ltd., A.l.R.
C
19S1 Mysore 59; Firm Kishore Cl1and ·shivo
Charan Lal v. Bruk.un
Ekctric Supply Co., A.I.R •. 1944 All. 66, 77; Moho=daii Sahib·v,
Abdul Klu:dir Saheb, (1930) 59 M.L.J. 351; Pearisundari Dasset v.
Hari Charan Mazumdar Chowdhry, I.L.R. 15 Cal. 211; Some,rhwar Dyal
v. Widow of !Alman shah, A.I.R.
1958 All. 488, Anandi/al poddar v .
. Gun~ndra, A.I.R.
196() Cal. 107 ana Tribeni Tewary v. ~
Naina, A.I.R. 1959 Pntna 460, referred to,
·
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( 4) lbe responckmt had, by his conduct and Jetter evinced an intention a01 10 perform his part of i_hc contract.
Therefo~. the fact that no
time had been fixed in the decree would not preclude the Court from
adjudgi_ng the contract as rescinded.
P05E..Jil ·
·
.
(a) If a contract does oot specify time for performan<le ~
hw will
llllJ>IY !JDder s. 46 of the Contract Act that th.e parties intended that the
~ligataon under the coorract should· be performed within a reasonable
tlllle dc:Jiendmg on the circumstances of t~ case. The ~trect between
the part~:s was not extinguished by the P'JSSing o! the speciilc perf~
:ance d~ree and u the cOOiract au.~isted despito the ~ree, and as the
~cree did DO! abrogate or modify any of the e-xpress or Jmp/J~d terms of
contract !1 must oo presumed tha~ tho parties tO tho contract were
under the obhvuoo to complete it within a. l'elL\OW\ble time. po3B-Hl ,
sb:sr~~) ~
respondent. by exercising his option to purcha.5e the 519f;
appellant C:::e. entllled 10 obtuin a conveyance of the sha.res from ~c
in the agree~~ment of the pun:llrue money. There wa.s ·no provi.stOD
shares • . TI!e!"efore ••.tto when thcreu.ft~r the appcUant ahoult.l con~Y t!J~
br lntimatina the' 'he wu open 1() e1ther party to make time -~~tt
expreuing Ita or hl: r larty, after -a rea&Onliblo ~riod, about lt. aft«
&ation Under the ~~
1~
and willingnesa. to perform its or his ot>U•
_.
had ~n Plli~d for 1 l i
liberty· wa.s not tllteo away bcca~ a doe~
'1:10
the tune tor 'Ita """f~ pee ftc .Ret rformance ot the contract without ft.'ttOi
r·• v.mance.
?03H; 704A-c]
ObJrrvatioru in p
Hai.sburyt Lawr of E7t 'f:::zaSpeci[ic .P_rrforrtUUIC• ~
edn,
p.
546 , t.rui
(•
g
3rd ed1t1on ·vol. 36, JS 1 to· 3S2,. expljU!~
J) AJ the lrxejy
,_.
&II order of the ~
·~ t_!tc .n,.~ io h~
ssion and· U · ~
•
~ l:llll!nl of the Putc~::~;:~ him. ~<? del.i~
~a
of tbt ~
that the~~~ to the rc.pon.Je~y, .~~~uon regardioa-whK:h wu_. ~
pe &Jlt was not in
'l . "'"'"a 11 no 11Ub6ta,n~ i.Q- ~
obi~®
' posiiiGn to dc.livet. tlte sh.acee •.. f11>56-G 1
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HUNGERFORD INVESTMENT v. H. MUNDimA (Mathew, ],) 693
. . ( 6)
WOOn the Co~ adjudges rescission of a . contraQt or a decree
•t 1s . onl.Y con <;em~ With the question whether the person rescinding it
was JUStified
1!! d~mg so .. In . the present case when the awellant came
t? !Jle Court With 1ts applloahOn for rescission there was already a res.
CISS!On of the contract and the decree by its letter dated February 11
~967. .It ?nlY ~ante~ a declaration
by adjudgment by the Court that
1t was )~stifi~ tn domg so. The, Court did not create any right which
the parttes d1d not p<>ssess when 1t made a declaration that the oontract
had been validly rescinded. Merely because it is necessary for the Court
to pass such an order it does not follow that it is the Court that rescinds
the oontract. It is only ·deciding upon too validity of the rescission al·
ready made by the party. f706A·El
There~ore, the respondent could ·not compbin that, because the appelv
lant obtam a stay of the order passed by the trial court giving the·
respondent ~ fortnight's _time to pay the purchase money the appellant
prevented htm from paying the purchase money, and resist the pmyer
for rescission. f706A-B]
Abram Steamship ·company Ltd. v. Westville Shipping Company Ltd.
L.R. L1923] A.C. 781, referred to.
(7) There is no substance in the clon~ntion of the respondent that
the appellant was not in a position to give a good title to the shares be--
cause 'A' company claimed a lien in respect of the shares.
f707C-Dl
(8) It could not be contended that the remedy of the 'appellant was
to execute the decree. for specific performance as a decree for money.
f709B-C)
A decree for specific performance is a ~
in. favour of both the
plaintiff and defendant in the suit, but it could be executed only in the
manner prescribed by 0.31, r. 3.2, C.P.C. The appellant could not have
iCXecuted the decree against the respondent as a money decree '!llld realised
the purdtase money from him. Therefore, if the respondent refused to
pay the purchase money there was nothing which prevented the appel·
lant from applying for rescisSion- of the d~e. f707FrH; 708G-H; 709CT
Heramba Chandra Maitra v. J;votish Chrmdra SinhtJ, A.I.R. _1932 CaL
579 and Bai Karimabibi
v.
A.bderahman Sayad Banu,
A.I.R.
1923
Bom. 26, 1eferred to.
(9) The only question with which. the Court was co~cernc:d was.
whether the respondent had disabled himself from perfonmng his part
o' the obligation under the decree. The fact that attachments of ~
decree by creditors prevented him from performing his part of the obli· ..
gation under the decree or obtain satisfaction thereof W?uld not makd
him any the less a defaulte~ so far as performance of his part of thet
obligation under the decree ts concerned. f709E.Gl
(10) There is no substance in the contention that the attachment
by B.company of the S 1% shares made it impossible for the appellant
to deliver the shares to the re~pondent as the at~acbment ord« dl.l'~
that the 51% shares should be produced for delivery to th7 respondent
against payment of the consideration mentioned in the specific perform~
ance decree.
f7090·Hl
CML APPELLATE JUR.ISDICTION: Civil Appeal No. 488 of
1971.
16-JOJ 1 Sup.CI/72
694
SUPR'EME COURT REPORTS
[1972] 3 S.C.I..
Appeal from the judgment and decree dated September 14,
A
1970 of the Calcutta High Court-in Appeal No. 148 of 1969.
S. V. Gupte, S. B. Mukherjee, B. N. Garg, K. K. Jain,
D. N. Sinha, Lina Seth, M. M. N. Pombra and H. K. Puri, for the
appellant.
R. C. Dev, Somnath Chatterjee, M. Bose, S. Swarup and
8
P. C. Bhartari, for respondent No. 1.
A. K. Sen, Shanker Ghosh, D. N. Gupta, .N. Khait(ln, Krishna
Sen and B. P. Singh, for respondent No. 4.
S. S. Khanduja, Promod Swarup and La/{~ Kohli, for respon- c
dents Nos. 7 and 8.
·
Gobind Das and B. D. Sharma, for respondent No. 1.
The Judgment of the Court was delivered by
~w, J. This is an appeal with certificate from a judgment D
of a Division Bench of the Calcutta High Court, setting aside the
order of a single judge of the Court allowing an application filed
by the appellant for rescission of an agreement for sale dated
October 30, 1956, as also the decree dated February 25, 1964,
for specific perfonnance of the agreement and for other alternative reliefs s~~ified in the application.
E
Hungerford Investment Trust Limited, (in voluntary liquidation) hereinafter called 'Hungerford' was the owner of 100 pet
cent shares in Turner Morrison & Co., hereinafter called 'Turner
Morrison'.
John· Geoffrey Turner and Nigel Frederic Turner,
both since deceased, were the owners of the 100 per ce.Qt shares
of Hun~erford .
The entire share capital of Turner Morrison
F
consis!OO of 4,500 fully paid' up ordinary shares of Rs. 1,000/-
each.
By exchange of letters it was agreed that Haridas Mundhra,
bereinafter called 'Mundhra' would purchase from Hungerford,
49 per cem: shares of Turner Morrison. The agreement also
provided for an option to Mundhra to purchase from Hungerford,
G
the balance of 51 per cent shares of Turner Morrison within 5
years. A fo.I'.Qlal agreement dated· October 30, 1956, was
~xe
cutcd between Hungerford, John Geoffrey Turner- - and Nigel
Frederic Turner on the one hand, and British India Corporation
and Haridas Mundhra on the other, embodying the terms of the
agreement. .Pursuant to this agreement, 49 per cent of the shares H
in Turner Morrison was sold and transferred to Mundhra and his
nominee British India Corporation. Thereafter, Mundhra ,exercised his option to purchase the 51 per cent shares. But the
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HUNGERFORD INVESTMENT v. 1L MUNDHRA (Mathew, /.) 695
A shares were not sold or transferred to him. So, on April 19,
1961. Mundhra filed a suit againSt Hungerford, 'tun)er Mow.son
.and others for specific perforinance of. the agreement to sell the
51 per cent shares (Suit No. 600 of 1961). As Mundhra did
not want to proceed a~ainst Turner Morrison, the suiot was dismissed as a~inst that company and a decree was passed on FebB ruary 25, 1964. The decree provided that the agreement relatinst to the sale of 51 per cent ordinary shares of Turner Morrison
ou~t to be soecifically performed and directed HWlgerford to
deliver to ~undhra, the 51 per cent shares against payment of
the considerati6n of Rs. 86,60,000/-. An injunction was also
~anted restraining Hungerford and the other deJendants in the
C
suit from voting except in accordance with the- instruction of
Mundhra and restraining Hungerford from selling the shares to any
person other than Mundhra. The decree, except as regards 1he
iniunction, was stayed by the trial iudge, on the application of
the appellant, for 3 weeks.
Hungerford, along with some ather defendants, filed an
D
appeal from the decree on March 18, 1964 (Appeal No. 69 of
1964) and obtained ~ stay of execution of the decree except in
so far as it related to' the ,injunction, until the disposal of ,fue
appeal. The appeal was dismissed on August 26, 1964, for the
reason that it was withdrawn. by the appellcmt, leaving Mundhra
fr~ to perform his part of the obligation under the decree.
:E
By a Master's summons dated August 30, 1965, Hungerford
made an ·application praying that Mundhra may be directed to
implement the decree by paying Rs.
86,60,000/, tbe un-paid
purchase money, within such time as the Court may direct, that
Hungerford b~ directed to execute proper transfer deeds in respect
of llhe 51 per cent shares within such time as the Court may
F
direct; and- :that in default of payment of Rs. 86,60,000/-
by
Mundhra within the period to be fixed, the Court may order the
rescission of the agreement and the decree.
The application was
dismissed on September 28, 19.65, by Justice R,ay, holding that
the application was one for execution of the decree in Suit No.
600 of 1961 and must be in a tabular form and "that any imposition of time limit would be to engraft something on· the
G decree which does not exist in the decree'.
Hun~rford preferred an appeal against the said order (Appeal No. 286 of 1965).
The appe.al ~as dismissed on August 8, 1966. The application
of Hungerford for leave to appeal to this Court was also dismissed
on November 25, 1968.
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H
Before the dismissal of appeal No~ 69 of.1964 filed against
the decree for specific perform~~ ih suit No. 600. of 1961, the
Certificate Officer, 24 Parganas had attached that decree; ·as
Mundhra failed to satisfy six certificates then pending against him.
696
' SUPREME COURT REPORTS
[1972] 3 .S.C.R:.
In pursuance ~o a Memorandum issued by the Certificate Officer.
Ray, J. made an order dated March 2, 1964, staying the execution of the decree until cancellation of the notice by the Certificate Officer or until the Certificate Officer or the debtor applied
for execution of the decree. The decree in suit No. 600 of
1961 was also attached in execution of three other decrees,
namely the decree obtained by Champaran Sugar Co. Ltd. and
B
British India Corporation Ltd. in sllirt No. 179 of 1960 of tho
Court of. Civil Judge, Kanpur and those obtained by Kanpur
Sugar Work! lAd. and Britisp India Corporation Ltd. in suit
No. 178 of 1960 in the Court of Second Civil Judge, Kanpur
and the Life Insurance Corporation of India in special appeal
No. 299 of 1961 of the High Court of Allahabad. The effect of c
these orders of attachment was that the decree-holder Mundhra
was prohibited and restrained from alienating, transferring or
charging his right, title and interest in the decree in suit No. 600
of 1961 or from obtaining satisfaction thereof.
In February, 1965, Bank Hoffman A.G. obtained a decree
D
from Queen's Bench Division, London, for
£657,345-17-9d.
with interest at 4! per cent per annum from the date of decree
against Romanigo Holdings S.A.H., a
holding company of
Hungerford and also against Hungerford. Bank Hoffman executed the decree in the Court of Distri~ Judge, Delhi, and got
the 51 per cent shares of Hungerford
at~ached. The District
Judge ordered the attachment and directed .. that the 51 per ctnt
B
shares be produced in the High Court of Calcll'tta for delivery to
Mundhra against payment of consideration mentioned in the
sj,eCific Perf9!manee decree.
·
Hungerford was in control of Turner Morrison upto February 25, 1964, when the injunction in regard to voting rights was
.J
granted. 'It had kept scripts of. 707 shares out of 2;295 shares_m
the office of Turner Morrison. · When Mundhra got. control of
Turner Morrison, these scripts went ·under his control and power.
The Liquidators· of Hungerford wrote on December 12, 1964, to
Turner Morrison to deliver the scripts of 707 shares to M/s
Sanderson and Margo~!, solicitors of Hungerford.· Tho request
G
fo,r ·delivery of 707 shares was repeatt:4 by Sanderson an~ Margo a
on December 22, 1964. Turner Mornson ~rote a letter on January 11. 1965 to K. N. Srivllstava,. Income Tax Officer, if the 707
·shares' seripts could be delivered to Hungerford and if ~
Income
Tax Officer had any objection to such delivery. On January 13,
1965, Turner Morrison's solicitors wrote to Mls . . Sanderson -and
Morgan that 707 shares had· become 1the .property of Mundhra
H.
and, for the first time, also claimed that thetit was ·a ·lietl on the·
shares. On January 18, 1965, K. N. Srivastava, the Income TU.
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HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathew,/,) 691
()fficer, wrote a letter raising objection to the delivery of 707
shares to Hungerford although the Income Tax Department had
no claim on lthese shares.
Tutiiler Morrison instituted a suit against Hungerford (Suit
No. 2005 of 1965) in' the Calcutta High Comt claiming'
Rs. 79,70,802 as principal and Rs. 47,96,250.16 as interest, in
respect of payment made by Turner Morrison tto Income Tax
authorities on behalf of Hungerford under section 23 (a) of the
Indian Inoome Tax Act, 1922. A claim was also made in the
suit for possession and sale of 1he 2,295 shares in the exercise
of their lien on those shares under Article 22 of rthe Articles of
Association of the Company. Mundhra was not a party to the
suit. Turner Morrison made an ex-parte application in the suit
on July 8, 1966, for appointment of a receiver in respect of the
2,295 shares. Mr. K. B. Bose was appointed receiver and he
took possession of 1,588 shares froq1 the First National City
Bank and 707 shares from llhe Police. On July 13, 1966, Sen J.
passed an order confirming the order of appointment of the receiver and directing that the receiver will be at liberty to deliver
the 51
per cent of shares to Mundhra on payment of
Rs. 86,60,000/- in performance of · his part of the obligation
l,lDder the decree, if so required by the Court hearing appeal
No. 286 of 1965. The order also provided that if Mundhr~ takes
the shares on payment of tthe price directed to be paid by the
decree, or in direction of the Coun of appeal, the lien if any, as
claimed by Turner Morrison will shift on to the money which the
receiver would £et from Mundhra.
Turner Morrison preferred an appeal against the order and
applied for stay of the order. The stay was refused but the appeal
was partly allowed on September 2, 1968, by setting aside the
direction given to the receiver to tender the shares to Mundhra
as also the direction that the lien of Turner Morrison would shift
to.the purchase money to be paid by Mundhra.
On Mat:ch 21, 1967, the application from which the present
appeal arises, was made by Hungerford (the appellant here) before the High Court. The prayers in the application were illartistically worded. It was prayed that the agreement dated October 30,
1956, and the de~ee dated· February 25, 1964, passed in suit
No. 600 of 1961 be rescinded, that the injunction granted by the
·decree in the suit be vacated unless Mundhra (the 1st respondent
here) deposits Rs. 86,6.0,000/- in the Court or with the receiver
in suit No. 2005 of 1965, that the receiver appointed in suit
No. 2005 of 1965 be· appoimed as receiver in the suit for speCific performance in respect of the said 2,295 shares, -tharthe receiver be directed to tender, on a day certain. the ilaid ShareS .to
898
SUPREME cOURT REPC)ltTS '
(1972] 3 S.C.R.·
Mundhra, and Mund.hra be direcred to pay the sum of
A
Rs. 86,60,000/- to the receiver on that day and to declare that
if Mundhra failed to pay llhe amount to the receiver on or befor.e
the day, the agreement dated October 30, 1956 and the decree
dated February 25, 1964, would stand rescinded. This application was allowed by Masood J.
·
The learn¢ judge overruled <the objection of Mundhra that
the application was not maintainable and held that it was maintainable under section 35 of the Specific Relief Act, 1877, notwithstandinp; the repeal of that Act by the Specific Relief Act,
1963, as the appellant had an accrued right under the section to
make the application even before the repeal.
The learned judge then found that Mundhra was not keen in
paying the purchase money and getting transfer of the 51 per
cent shares for. the reason that t:·e injunction granted by the
Court in the decree in suit No. 600 of 1961 restraining the appelB
c
lent from voting except in accordance with the instruction of
Mundhra made him virtually lthe owner of 100 per cent shares
D
in Turner Morrison, and if without paying any amount for the
51 per cent shares of Turner Morrison, he got control of Turner
Morrison, it was to his interest not to pay anything to the appellant.
As regards the objection by Mundhra that since Turner Morrison claimed a lien on the 51 per cent shares and, therefore, the
E
~llant was not in a position to deliver the shares free ·from
encumbrance, he held that there was no bona-fides in the claim
of Turner Morrison : firstly because !the lien was not set up by
Turner Morrison in its written statement in the suit filed by
Mundhra for specific 'Performance, secondly because in the· suit
filed by l'urner Morrison claiming the lien, Mundhra, who was
F
interested in rthe shares upon which the lien was claimed, was not
made a party and thirdly for the reason that by his letter dated
November 29, 1955. Mundhra had agreed that Turner Morrison
would pay the income tax liabilities of Hungerford to the extent
of Rs. 46 lakhs. The learned 'Judge found it impossible to be·
lieve that Mundhra had no knowledge about the suit filed
by
Turner Morrison claiming the lie11 a& he was m complete control
G
of Turner Morrison at the time the Suit was ~
ana s8id that
TurDer MorrisOn and.Mun.dhra were colluding with each other to
defeat the apPellant in its attcmi't to get ilhe purchase money from
Mundhra and that suit No . .2005 of 1965 was inStituted with the
connivan~ of Mundhra. The .~carDed 'udge a15o. fourid that even
if Turner Morrison l,u\d a lien on th~ share$, sin,ce there was no H
covenant. for title," Mundhra wa8. not iustified in declining to tUe
dtli:VetY of the . $hares on the score that TUrner. Morrison·liaa a
lien u'POri the shares.
·
·
·
·
1
HUNGERFORD INVESTMENT v. H. MUNDHRA (Mathew, J.) 699
A
The learned judget after evaluating all the circumstances ukimartely came to the conclusion that Mundhra ·committed breach
of the contract which he was directed specifically to perform, that
be created a situation which made it practically impossible for
hlm to perform his part of !the obligation under the decree and
that the ag~egtent dated October 30, 1956 and the decree <Wed
8
February 25, 1964, for specific performance must be rescinded.
The learned judge, therefore, appointed the receiver in suit
No. 2005 of 1965 as receiver of the 51 per cent shares and directed Mundhra to pay Rs. 86,60,000/- to the receiver within a
fortnight from the date of the order and the receiver to hand over
the 51 per cent of the shares to Mundhra's solicitors if the amount
c was paid as directed. The receiver was also directed to pay the
amount to tbe solicitors of Hungerford. The stay order passed
by Ray J. on March 2, 1964, was vacated and liberty was given
to the Certificate Officer or lthe Tax Recovery Officer, 24
Parganas to take such steps against Mundhra· as he thought fit.
In default of -payment of Rs. . 86,60,000/- by Mundhra to ·the
receiver within the time specified, the Court directed that the conD tract arid th_~ decree would stand rescinded and Hungerford absolved from all obligations under the said contract and the
decree.
'
Against the decision, the appellant filed appeal No. 148 of
1969 before a Division Bench of the Court and Mundhra .filed a
E cross-obiection.
The appellalte Court found that if Mundhra was really interested in getting transfer of the shares by paying the money, he
would not have allowed th~ opportunity to acquire the shares
under the order dated July 13, 1966, to slip by, that Mundhra
knew of the order of July 13, 1966, and also of the opportunity
F
given to him by the order to get delivery of the shares on payment of the purchase money, but that he did not avail of the
opportunity for the reason that, if without ' paying money, he
could virtually enjoy the .same advanta~. it would be foolish
from a businessman's point of 'view to invest any amount in purchasing the shares. The Court observed :
G
R
"A busines.sman who files a suit for specific performance of a contract to buy shares and prosecutes that suit
to a successful termination in his favour, will not fritter
away the benefit under the decree except for a higher
or superior advantage and that advantage Mundbra
got under the decree in suit No. 600 of 1961."
The Court then held that application filed by the appellant for rescission of- the contract and the decreo was not main ..
tainable. The reasoning of the Court was two-fold. The Court
700
SUPR.EMB COUllT ltBPOR.1S
[1972] 3 S.C.R.
said that the appellant had no accrued right to apply for rescission
A
under section 35 of the Specific Relief Act, 1877, which would
survive the.repeal of that Act by the Specific Relief Act, 1963,
and so, no application for rescission would lie under section 35
of the ·old Act read with section 6 of the General Oauses Act.
1897. Jt then held that since section 28 of the Specific Relief
Act,. 1963, only provided for rescission of a dec~· for specific
B
performance of a contract for the sale or lease of immovable property, the application was illlcompetent under the section and
allowed the appeal and cross-objection in part.
We do not think .that the appellant had an accrued right for c
rescission of the contract or the decree for specific performance
under section 35 of the Specific Relief Act, 1877, when the Act
was repealed by the Specific Relief Act, 1963, on March 1, 1964.
It may be recalled that .the decree in suit No. 600 of 1961 was
passed on February 25, 1964 ind that the application for resci!~
sion of the decree was filed on March 21, 1967. Section 35 of
the Specific Relief Act, 1877, so far as it is material for the purD
· pose of this case, provided that where a decree .for specific performance of a contract of sale or of a contract to take a lease ha~
been made and the purchaser or lessee makes default in payment
of the purchase money, which the Court has ordered him to pay,
the decree may be rescinded as regards the party in default either
by a suit or by an application. The right to rescind the decree
E
under the· section can arise only if the purchaser makes default
in paying the purchase money ordered to be paid under the decree.
Before the lapse of a reasonable time from the date of the decree,
the appellant could have no right to have the decree rescinded
on the ground of default of the purchaser. To put it in other
words, the right of the appellant to have the decree rescinded
was dependant upon the default of the purchaser in paying the
purchase money. Such a default had not occurred when the
F
Specific Relief Act, 1877, was repealed, as a reasonable time for
the performance of the obligation under the dec.ree had not elapsed
from the date of the decree.
The more important reason VJhy
there was no default in this ca.~ was that the execution of the
decree in suit No. 600 of 1961 was stayed by orders of the trial
G
and appellate Court till August 26, 1964. We, therefore, agree
with the finding of the Div;ision Bench that the appellant had no
accrued right on the date of the repeal to file an. application under
section 35 of the Specific Relief Act, 1877, which was saved
under section 6 of the General Clauses Act, 1897. The mere
right to take advantage of the provisions of an Act is not an
H
~rued right [see Abbott v. ·The Minister for plans(1)].
(l) [l89S] A.C. 42S.
.A
HUNGERFOIU> INVESTMENT v. H. MUNDHRA (Mathew, J.) 701
We also agree with the finding of the Division Bench that since
section 28 of. the Specific Relief Act, 1963, provides only for an
application fox: rescission of a decree for specific performance for
the sale or lease of immovable property, no application to rescind
a decree for specific performance of an agreement to sell movables,
would lie under that section.
The-question then is whether the application ~as mamtainable under -any other provision of the law. The Specific Relief,
Act, 1963, is not an exhaustive enactment. It does not .consolidate the whole law on the subject. As the preamble would indicate, it--is an Act ".to define and amend the law relating to certain
C ' kinds ,.of specific relier•. It does not purport to lay down the law
relating -to specific relief in all ~ts ramifications. -In Ramda.s
Khatau & Co. v. Atlas Mills Co. Ltd.(l) it was held that the
Specific Relief Act, 18 77, was not exhaustive. 1 In Rahmath
Unnissa Begam v. Shimoga Co-operative Bank Ltd. another(2 )
the Court said that the Specific Relief Act, 1877, is foun.ded on
English equity jliri.sprudence and that it is permissible to refer to
English Law on the subject wherever -the· Act did not deal specifically with any topic [see also Firm Kishore Chand Shiva Charan
I)
E
F
Lal and another v. Budaun Electric Supply Co. Ltd.(')]. Although a matter on which· the Act defines the law it might g~neral
ly be ·exhaustive, the Act as a whole cannot be considered as
exhaustive of -the whole -branch of the law of specific perfoi'Iijance.
It is settled by 'a long course of decisions of the Indian High
Courts that the Court which passes a decree for specific performance retains control over the ·decree even after the decree has
been passed.
In Mahommadalli Sahib v.
Abdul Khadir
Saheb(') it was held ~at the Court which passes a decree for
specific performance has .the power to extend the time fixed in the
decree for the reason that Court retains control over the decree,
that the contract between the parties is not extinguished by the
passing of a decree for specific performance and that the contract
subsists notwithstanding the passing of the dectee. In Pearisun•
dari Dassee v. Hari Charan Mozumdar Chowdhry( 5 ) the Calcutta
High Court said that the Court retains control over the proceedG _ ings even afte~ a decree for specific performance has been passed,
that the decree pas~ iJ,l a suit fo.r specific performance is not a
final decree and that the st1it .m~t be d~me4 to be pending even
after the. decree.
'n~ same view was taken in Someshwar Dayal.
and othrtrs_ v. Widow ofl,-aln:tan Shah and others(8). In A.nandi-
~l P~ddar v .. Gunendra ,Kr. Roy (11fll _
another~~) Raj J.! speaking
JI
{1) A.I.R.I931 Bombay lSl.
-
. (2) AJ.R. l9Sl Mysore 59.
(3) /..I.R. (31) 1944 Anahabad 66 at p. 77. (4) (1930) M.LJ. Vol. S9, p. 351.
(5) I.L.R. Calcutta Series. Vol. XV, p. 211. (6) A.I.R. 1958 Allahabad -488.
(7) A.I.R. 1966 Calcutta 107.
702
SUP1lEME COUllT REPORTS
[1972.] 3 S.C.R.
for ,the CoUrt,. said that. the cOOit rewns .control over the matter
A
even ·af~r passing a deeree for speeific performance and that vir~
tually, theo decree is in the nature of a preliminary one. In
Trilieni Tewary and others v. Ramratan Nonia and others(1) it
was held that the Court retains seisin of the· case notwithstanding
the fact that a decree for specific perfonnance has been passed
and that the decree is really in the nature of a preliminary decree.
B
Fry in his book(2 ) on Specific Performance- states the law. in
England as follows :-
. --
"It may and not unfrequently does hapPen that after
judgment has been given for the specific: performance of
a contract, some further relief becomes necessary, in consequence of one or other of the parties making default
in the perfonnance of some!}ling which ought under the·
judgment to be perform~ by him or on his.part; as for
instance, where a vendor refuses or is unable to. execute
. a proper conveyance of the property, or a purchaser to
pay the purchas~ money •..•.•
"There are two kinds of relief after. judgment for
specific performance of which either party. to the contract
may, in a proper case, avail himself : ·
"(i) He may obtain (on motion in the action) on
order appointing a definite time and place for
the completion Of the . contract by payment of
the un-paid purchase-money and delivery Over
of the executed conveyance and title deeds, or
a period within which the judgment, is to be
obeyed, and, if the·other party fails to obey tho
order, .may thereupon at once issue a writ of sequ~tration against the · dclaulting party's' estate
arid effects . . . .. . .• ·~
·
c
D
F
"(ii) He may ~wly t:O the. Gourt _(by ,1notion in tho
· G
action) for; an ~rd¢!. rescind~ ~
~~t. 9n.
an applice~.tion ~ ~
kind, if 1~ .a~ .that the
•
party JAOVed agamst. has positively. ~fused. to
cop1plete .. the. ~tract, , its inun.e4i,ate ... rescissiop
~Y ~ ~;
otherwise,. the. on:fF will .. bo for
rescission .in default of eompletion · within a
H
t!;...:.!ted.. .
?•
.
ww .
.time~ •..••. ~ •• ~
(1) A.I.R. 1959 Patna 460. · (2) Fiy on SpecifiC Performance. 6th Od. p, $46.
I
iluNGDPORD INVESTMENT V. H. MUNDIDt.A. (Mathew, J.) ·703
A
In Halsbury's laws of EDgland(l) the law is stated as under :-
"Ancillary relief may be obtained after judgment in
an action for specific performance where such further
relief becomes necessary ....... .
Either party may also obtain an order rescinding
B
the contract in default of completion within a fiXed time."
As the Court retained control over the matter despite th~
decree, it was open to the Court, when it was· alleged that the
party moved againsti has positively refused to complete the con~
tract to entertain -the application and order rescission of the. decree
c if the allegation was proved. We, therefore, think that the application of the appellant was competent.
It was contended on behalf of Mundhra that he was always
ready and willing to pay the purchase money, but since the ctecree ..
·did not specify any time for payment of the money, there was no
default' on. his part. In other words, the contention was that since
D
the decree did not specify a time within which the purchase money
should. be paid and, since an application for fixing the time was
made by the appellant and dismissed by the · Gourt, Mundhra
cum.ot be.said- to have been in default in not paying ,tbb:purehasemoney so that the appellant might apply for rescisiion of the
decree. H a contract does not specify the time for performance,
E
the law will imply that the parties intended that the obligation·
under the contract should be performed within a reasonable tiine.
Section ~6 Of the Contract Act provides that where, by a contract.
a promisor is to perform· his promise without a9.plication by the
promisee, and no time for perfonnance is specified, ·the engagement must be perfonned within a reasonable time ~d the .question
F
"what is reasonable time" is, in each particular case, a question of
fict.
We have already indicated that the contract between the
parties was not e~tinguished by the passing of the decree, that it
subsisted notwithstanding the decree. It was an ~plied term of
the contract and, therefore, of the decree passed thereon tUt the
parties w<>uld perform the contract within a reasOilable time.